Deductions & credits

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This is a gift. Your aunt even said so: "In fact, the aunt wrote 'Gift' on the Grant Deed." 

I would be more cautious in reaching that conclusion. Doing so requires detailed legal knowledge for the state involved and application of that law to the facts of this case.

If I were arguing for @Lonestar I might well say the writing of "Gift" on the dead was intended as a gift when Aunt died, not an immediate gift. Whether that is right will depend upon state law about gifts. Intent to make a gift (and delivery and parting with dominion and control) are all required for a completed gift. What was the intent here? There are many cases where adding a name to a joint bank account does not make a gift of the assets unless withdrawn. (Google "joint account convenience".) However, real estate is not always the same as bank accounts.

Critically who has to prove the correct intent and what is the level of proof required? Is it the donee (niece)? Is the the IRS challenging you? Is the burden of proof "more likely than not" or something higher like ("clear and convincing evidence").  If it is a higher burden and the IRS has it that might factor into a choice to claim the 100% step-up.  

Or it might well be, perhaps is likely to be, that adding a name to real estate is a completed gift. That it doesn't matter that gift is written on the deed or not. In that particular state just filling out the dead (unlikely a bank account) is enough.

@Lonestar is doing a great job. Clearly stating the detailed facts, reading all that he can find, and planning on seeking professional advice. My recommendation is consulting with an Estate Planning attorney in the state where the property is. Not a CPA. Not a real estate attorney. One credential to look for is an ACTEC fellow. See https://www.actec.org/ but they are sometimes hard to find and/or busy. I would be ok with any attorney who regularly practices estate planning involving real estate.